The Relative Performance of US and Canadian Economies During the Crisis

Here's more on the comparison of of the performance of the US and Canadian economies during the crisis:

When 5.0% GDP growth is better news than 5.9% GDP growth, by Stephen Gordon:In 2009Q4, US GDP grew by 5.9% at annual rates; the number was 5.0% in Canada. But our news was much better. Here is a graph of the contributions to GDP growth by expenditure category:

US GDP growth would have been only 2.0% without the contribution of the inventory terms (which was itself a deceleration in the rate at which stocks were being drawn down.) In Canada, the 2009Q4 GDP number would have been 5.8%.

And look at the contribution of government spending. In the US, the contribution was negative: the increase in federal spending was more than compensated by cutbacks at the state level.

It's easy to see why the Canadian numbers were greeted with more enthusiasm than were those in the US, even though the headline number was smaller. Growth was evenly distributed across all types of expenditures, and we can expect inventories to bounce back as well fairly soon.

The negative net contribution of government to output growth is disappointing. That's not how it's supposed to work in a recession.